Guinness owner Diageo says it could lose $200M in profits from tariffs

Guinness owner Diageo estimated a $200 million hit to operating profits in its next financial quarter, beginning in March, if tariffs on the U.S. and Mexico go into effect next month.

Nik Jhangiani, the spirit producer’s chief financial officer, said on an earnings call Tuesday that 45% of its net sales in the U.S. are derived from products made  in Mexico and Canada, with the “vast majority” of them being tequila.

While the Casamigos maker believes it could mitigate around 40% of those costs, geographic origin requirements for tequila prevent the company from fully moving production out of Mexico. Jhangiani said Diageo would not rule out price increases to help offset the costs of the tariffs, which is what it did during the first Trump trade war. 

“It is just not the first thing that we would go for, given that we already have some mitigations. And we'll look at the consumer environment, what competition is doing,” Jhangiani said. “I think [we will] gauge the timelines of which these tariffs might stay or not.”

Tariff threats have left alcohol and spirits producers on edge, especially as consumer demand for imported beers and tequila soars. Diageo touted a strong performance for its tequila brands, with its earnings report citing Nielsen data which indicated Don Julio was the No. 1 share gainer in the spirits category.

Diageo CEO Debra Crew told investors the company is “firmly focused on what we can control.” Part of the company’s investment approach includes additions to its supply chain. Last week, Diageo announced it would spend $415 million on a new alcohol plant in Alabama in order to boost its presence in the South.